SA's communications regulator, the Independent Communications Authority of SA (ICASA), has again received a qualified audit, because the auditor-general could not verify licence fee collections, and what was paid over to National Treasury.
ICASA, which is the regulatory authority over a sector worth about R50 billion, has received a qualified audit report for three consecutive years. The AG qualified its financial statements for the year to March, because he was not able to verify that the amounts due to it for licence fees, or what was payable to treasury, were correct.
The AG writes in the report that he could not "obtain sufficient, appropriate audit evidence" to confirm that ICASA had received R793 million in licence fees, and the resulting payable balance of R801 million to National Treasury.
ICASA collects licence fees from operators, which it must pay over to treasury's National Revenue Fund (NRF) within 30 days. It collects these payments from broadcasters, telecoms operators and for the use of spectrum.
Clamp down
However, its inability to verify the amounts it says it has received and paid over is likely to put a strain on its relationship with treasury, which could become stricter when deciding how much funding to provide to the authority, notes Richard Hurst, Ovum's emerging markets analyst.
The regulator last year requested more funding from the state for the three years between 2011 and 2014, arguing that if it does not receive additional funding, it will not be able to fulfil its mandate.
ICASA has since moved from a three-year to a five-year planning cycle and its latest strategy indicates that the previous shortfall impeded some of its targets, but that partial additional funding was received for 2013 onwards and these ring-fenced allocations will assist in meeting some of its priorities.
The regulator turned over R320 million in the year to March, compared with R296.8 million a year ago, and recorded a net surplus of R6.5 million compared with last year's deficit of R9.1 million.
Hurst says ICASA's lack of controls muddies the waters for the telecoms sector as the authority may not have as much of a free hand as before if treasury clamps down on funding.
Controls lacking
However, despite its improved financial position, the AG found it did not implement controls over daily and monthly processing and reconciling of transactions. ICASA also failed to prepare regular, accurate and complete financial and performance reports that are supported and evidenced by reliable information.
The AG states: "Due to the lack of controls over the invoicing and collection of licence fee revenue, the entity's records did not permit the application of alternative audit procedures and, consequently, I was unable to determine whether any adjustments to the National Revenue Fund Receivable and resulting payable figures were necessary."
ICASA was found to have failed to implement record-keeping in a timely manner to make sure that complete, relevant and accurate information is accessible and available to support financial and performance reporting, notes the AG.
Management did not adequately review and monitor compliance with applicable laws and regulations. The institution did not design and implement adequate formal controls over IT systems to make sure they were reliable and that information was available, accurate and protected.
In addition, the AG found that ICASA's accounting officer did not establish adequate procedures for quarterly reporting of performance to the executive authority to facilitate effective performance monitoring, evaluation and correction as required by the Public Management Financial Act.
The AG also found that the accounting officer did not exercise adequate oversight responsibility around financial and performance reporting and compliance and related internal controls.
Working on it
CEO Themba Dlamini writes in the report that the authority is focusing on the need for improved financial management and controls.
Dlamini acknowledges that ICASA again received a qualified audit because on the NRF receivables and payables - based on "the defects in the General Licence Fee Regulations and the collection of spectrum fees owing".
However, Dlamini says the authority acknowledged these shortcomings at the beginning of the year in its presentation to the Parliamentary Portfolio Committee on Communications. It has also asked the minister to grant it relief from applying the 2009 General Licence Fee Regulation for the collection of annual licence fees for the 2009/10, 2010/11 and 2012/13 financial years.
The authority has made progress in addressing other concerns, such as managing assets, improvements in clearing the suspense account, as well as an 80% reduction of fruitless, wasteful and irregular expenditure, says Dlamini.
ICASA has also formulated a finance turnaround plan to ensure that no further audit findings occur by creating a sustainable control environment, says Dlamini. ICASA did not respond to questions seeking clarification within the set timeframe.
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